Volume 9 • 2022 • Number transnational corporations investment and development

3.1 Dependent variable
A “relocation” in our empirical analysis is defined as a firm reducing their operations 
at home by more than 10 per cent of their size, as measured in the number of 
employees, while concurrently opening up a new foreign affiliate or acquiring an 
existing firm abroad. This definition is similar to Pennings and Sleuwaegen (2000). 
The establishment of a foreign affiliate is based on its date of incorporation. A 
firm owns a foreign affiliate if it holds at least 10 percent of voting shares. Our 
dependent variable is captured as a dummy variable equalling 1 if a firm reduces its 
operations at home by more than 10 per cent of their size (as measured in number 
of employees), and at the same time opens up a new foreign affiliate or acquires an 
existing firm abroad.
6
6 
Note that a firm may have more than one foreign affiliate and may therefore potentially engage in 
multiple relocations in different countries. Our definition implies that the relocation dummy will be 1 for 
the home country under these conditions, irrespective of how many new investments there are abroad. 
It does not matter whether the reduction in operations at home is accompanied by one or many new 
investments abroad. 

---

11
Multinational enterprises and the welfare state
Table 1. Distribution of MNEs and welfare expenditure, by OECD country, 1997–2007 
and 2013–2019
1997–2007
2013–2019 
a
Welfare 
state 
expenditure 
as % of GDP 
in 1997
Welfare 
state 
expenditure 
as % of GDP 
in 2007
Number 
of firms 
relocating
Percentage 
of firms